Statement of CFA's Director of Investor Protection Barbara Roper In Response To House Subcommittee Mark-Up of SEC Civil Enforcement Authority Bill
State Preemption Provision is "Poison Pill" that Must be Stripped from the Otherwise Pro-Investor Bill
For immediate release
Contact: Barbara Roper, Director of Investor Protection, 719-543-9468
July 10, 2003
Washington, D.C. - "The House Capital Markets Subcommittee inserted a poison pill in its otherwise pro-investor SEC civil enforcement authority legislation (H.R. 2179) today when it amended the bill to prevent state securities regulators from imposing the sort of routine conduct remedies on broker-dealers that are an essential component of an effective regulatory program," said CFA Director of Investor Protection Barbara Roper.
"There is absolutely no justification for this sweeping preemption. It must be stripped from the bill," Roper added. "Investors should not be asked to pay for increased SEC enforcement authority with a dramatic reduction in state enforcement authority. It would be better not to pass this bill than to pass it in its current form."
CFA had expressed concern over the initial provision of the legislation, replaced by this amendment, which would have preserved the ability of states to impose conduct remedies, but would have required them to send any monetary penalties imposed in such actions to a federal fund for the purpose of investor restitution. "While we supported the stated goal of increasing restitution to investors, we were concerned that the legislation, as then written, would have applied to in-state actions where there was no conceivable federal interest and would have discouraged states from imposing appropriate remedies where they found serious violations," Roper said.
"This amendment offers none of the benefits of the original provision - in the form of increased restitution to investors - and it magnifies its drawbacks," Roper said. "It is inconceivable that the members who offered and voted for this amendment believe this is an appropriate response to a market that has been wracked by fraud."
The Consumer Federation of America is a non-profit association of some 300 organizations founded in 1968 to represent the consumer interest through advocacy and education.